More than 5,000 capital projects worth in excess of $1.6trn in pre-executive stage, consultancy says
Saudi Arabia currently holds the greatest potential for the construction sector in the GCC, with more than 5,000 capital projects worth in excess of $1.6 trillion in the pre-execution stage, a cost and project management consultancy has said.
In a statement, Linesight, an international consultancy with offices in Dubai, Manama and Riyadh, said that long-term positive factors such as economic diversification and social reform, as well as general demographic demand and renewed government ambitions, will be key drivers for the Kingdom.
According to the company, which has a GCC pipeline worth more than $10 billion, activity in the construction sector throughout the Gulf countries will begin to recover steadily from the beginning of 2020, after a challenging period of subdued performance.
This includes over 150 development projects, worth $3.27 billion for the Tabuk region in the northwest of Saudi Arabia, which was announced by King Salman bin Abdulaziz, in November 2018. The king also launched more than 600 projects in Qassim, 400km northwest of Riyadh, worth a total of $4.36 billion, and another 200 new projects in Hail, also in the northwest of the Kingdom, valued at $1.14 billion.
However, the centrepiece of the Kingdom’s ambitions for its Vision 2030 initiative is the $500 billion, 26,500sqkm Neom project, which is situated along 466km of the country’s Red Sea coast, near Egypt and Jordan. The first phase of Neom is due to be completed in 2025.
“Naturally, many regional industry professionals are now upbeat about the prospects for Saudi Arabia,” said Damien Gallogly, regional director for the Middle East at Linesight, which has offices in Riyadh, Dubai and Bahrain.
“Saudi Arabia is also actively seeking to improve its rail, airport, port and other transport-related infrastructure, as well as increase residential supply, healthcare, leisure and tourism facilities. Without doubt, the kingdom remains the most active construction market in the region, signalling exciting times ahead.
“To underpin social demand, the Saudi government has overseen a major cultural and social transition since 2017, which has allowed mixed audiences at cinemas and concerts and brought an end to restrictions on women travelling alone,” added Gallogly.
The project developments in Linesight’s own GCC pipeline are currently worth in excess of $10 billion, with average annual revenue growth of over 6%. Some of the more prominent developments in Saudi Arabia include the $4 billion Thakher City mixed-use project in Makkah and the Al Faisaliah District redevelopment project in Riyadh, which involves upgrading the Al Khozama, retail, hospitality and commercial complex.
Saudi Arabia’s budget for 2019 is $295 billion, a 7% increase over 2018. The economic and social reforms are clearly designed to attract more foreign direct investment, which stood at $3.5 billion in 2018, already double that in 2017.
Saudi Arabia still has certain state assets which the government aims to generate over $10 billion through its privatisation programme, notwithstanding the aborted Saudi Aramco IPO. Last but by no means least, there is the Saudi sovereign wealth fund which should surpass $600 billion by next year.
“Saudi Arabia is committed to completing these projects and is confident that it will be find the appropriate finance to do so. It is this strategic intent that in my opinion, makes the kingdom the most dynamic construction market in the Middle East,” said Gallogly.